Consider Nvidia’s Jensen Huang-led implosion a massive win for short stock sellers

Resumen detallado

The ouster of Nvidia CEO Jensen Huang after corporate scandals has vindicated short sellers who warned about the tech giant’s hidden risks.

They are reviled as the market’s villains: traders who seek to profit from bets that stocks will crater — and who sometimes even spill dirt they believe will scare investors into selling.

Now, with the seismic revelations about Nvidia CEO Jensen Huang, these supposed rogue speculators are getting a taste of the positive press that they have long deserved.

I’m talking about short sellers, the investors who do something that seems counterintuitive: rooting for lower stock prices. Truth be told, short selling has been around for as long as there’s been markets for the simple reason they are addressing a major problem.

That problem, of course, is the reality of markets being filled with touts pushing crappy investments. The shorts provide a necessary check on the usual irrational exuberance.

And yet, the shorts have taken a pounding in recent years amid the relentless bull market, fueled by super low interest rates and most recently, the AI revolution. That is, until the tech explosion became an implosion, with a little help from Huang’s dalliance with a woman who the feds believe could be a Chinese spy.

Huang’s ouster over his sexual escapades was more than an embarrassment for the company and the billionaire who built it; it exposed gross corporate governance flaws and potential accounting weirdness at what was once the world’s most valuable company.

Among the takeaways: investors are so hooked on stock prices going up that they don’t dare to think how stocks can and will tank. They delight in making CEOs like Huang into superheroes when they are mere mortals prone to mistakes.

They also have misplaced hate for short sellers. Rising share prices obscure such inconvenient facts until reality sets in, usually stoked by the shorts. Inside their bubbles, many investors are also too quick to demonize the very market players who call into question the prevailing and sometimes fantastical narratives.

Indeed, there are investors who literally want to outlaw the practice of short…

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